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Your product delivery process can either create or destroy value. Traditional approaches to governance and funding can stop you focusing on finding true customer value. The key is to iteratively explore different fits. This will help you find great Product-Market Fit to increase the value returned.

VFQ connects Value and Discovery

VFQ focuses on outcomes. When assessing a client context in Emergn, we ask a powerful question: In this context, how might we Increase Value, Improve Flow and Enhance Quality?. This keeps us focused on the outcome rather than on implementing methodologies. As you’ll notice Value comes first. And it requires solutions to balance the end-to-end Flow of ideas-to-market and how we explore what Quality means for a customer. Each outcome is linked.

One of the guiding principles at the heart of the VFQ Mindset is:

Discover Quality through Fast Feedback

Discovery connects how we know what’s valuable, with the process of exploration and how we need to govern work.

This principle means that you need to design context sensitive ways to create timely feedback loops. Doing so, should help you manage different interactions both inside and outside of your company to deal with different risks – market, operational and technical. This post focuses on Product-Market Fit. As Marc Andreessen said, Product-Market Fit is the thing that matters most. It’s not that you don’t need to create the products that work operationally and technically well, but the market is what determines the value of your ideas.

In order to figure out the Product-Market Fit, you need to construct and manage good experiments and feedback loops to make progress in discovery as you search for the things that customers really, truly value. I’ll cover experiments in more detail in another post, but it’s worth noting they are an essential skill to master as you develop your discovery mindset.

Remember:

  1. Customers don’t always know what they want or need.
  2. Developers and managers don’t always know how to build things.
  3. Things will change along the way.

Creating the right Value Proposition

Building (or improving on) great products and services is a process of constant discovery. As competition moves, so do the expectations of customers. When technology evolves, so do the expectations of customers. As your ideas develop, so do the expectations of customers. Customers (or, in cases where they’re not a buyer – the users) are at the heart of the discovery process.

Whether or not the solution you’re creating is about rolling out an internal change, or creating a new product or service, or building a new piece of software, you are working on a Value Proposition that is for a customer somewhere.

A Value Proposition has four major parts:

  1. A Need – the reason for the work. This can be described as a pain, a desire or gain or as a specific job for one or more types of users or other constituency.
  2. Your Approach – a solution to solve the Need. This is something that might (or should) be unique to you.
  3. Some Benefits – the results of someone using your solution and the return on the cost outlay in time, money or any other resource. It should be compelling, and it should also alleviate the Need.
  4. The Competition – a view on alternatives that might be solving the same need or be quite similar to your approach. Ultimately, you need to answer why you and only you?

Each piece of the Value Proposition can (and will) shift over time. What it looks like at the start of the process won’t (or shouldn’t) be what it looks like at the end. Change is part of the process. It’s customers that will give us the insight as to how well the Value Proposition works.

Defining, refining and managing fit to explore

In a previous post I talked about how to really define good MVPs. They should connect to specific goals on a journey to learn, create insight and deliver value. This will lead you to explore different fits. In the MVP post, I shared three fits. There is, however, typically a fourth. They’re all important to get to Product-Market Fit.

They are:

  • User Need-Problem Definition Fit
  • Problem-Solution Fit
  • Product-Market Fit (This is also Value Proposition-Population Fit when it’s more about internal change)
  • Value Proposition-Business Model Fit

Whilst the focus of moving through each one may be sequential, it is possible that something learned in focusing on any one of the fits might impact on work previously done requiring change along the way.

It’s easier to think about a fit graphically. This diagram shows the difference between a poor fit and a great fit.

good-fit-poor-fit

A poor fit will destroy value. However, a great fit will maximise the outcome of the investment and, maybe, outperform your expectations.

The visual is helpful to understand. But, it’s important to remember fit is a number of qualitative and quantitative observations, measurements and conclusions. Which is why experiments really help us learn quickly and effectively to close the gap from a poor fit to a great fit.

Investment challenge: not focused on Product-Market Fit

One observation I have is that initiatives start off when the User Need-Problem Definition Fit is often incorrect and assumed. This can be a root cause to a problem in the way larger, established businesses commission work because the process doesn’t encourage an iterative process to close the gap between assumptions and reality. This often results in building software and product solutions that don’t really meet the needs of users. The process doesn’t lead to the inevitable outcome of Product-Market Fit. Below is a diagram of how work is typically commissioned in enterprises. At the heart of the problem is the assumption that the need is well understood and the proposed solution is correct. It’s based on a mindset of wanting certainty and not one of discovery. It’s also about competing internally for mandates and budgets, and not on Value Propositions.

assumed-solution-is-not-right

This approach can be costly, dangerous and time-consuming to delivering your ideas. You need to actively challenge it in order to maximize returns. Below is an alternative model that is based on the Discovery Mindset and provides the foundation for a different funding and governance approach that actively searches for fits before moving on to the next (and more capital intensive) stages of development and delivery.

incremental-approach-discovering-fit

In this approach, as you head to Live for the first time, you are discovering Value along the way. The feedback loops put into place with customers and users help close the gap between what was assumed and what is real, and it also provides feedback on how well the solution fits the problem. Once the first Problem-Solution Fit is met, the goal is to scale to explore and create Product-Market Fit.

Stay focused on one fit at a time

It’s also worth saying that you need to do work on each of the four fits at all stages of development – you just need to focus on one fit and major on doing it well to answer the right questions before moving on. So, whilst you think about whether you have got Problem-Solution Fit, you should also run some early experiments on your business model, and continue to question whether you really have a well-defined user need. Doing too much on the business model isn’t worth it until you have a good fit, but doing no work might mean that you end up building something that will never be viable. Taking this approach means that over time your Value Proposition will improve and really satisfy your customers.

 

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